Massachusetts hospitals to lose billions

Sunday

Aug 18, 2013 at 6:00 AM

By Beverly Ford, NEW ENGLAND CENTER FOR INVESTIGATIVE REPORTING

Massachusetts hospitals will lose millions of dollars in funding this year — and perhaps tens of millions more in the future — because of penalties imposed by the federal Medicare program on hospitals that excessively readmit some of the state's sickest patients, the New England Center for Investigative Reporting has found.

"In Massachusetts, we're facing approximately $5 billion in cuts to Medicare over 10 years," said Tim Gens, executive vice president with the Massachusetts Hospital Association. Add to that an anticipated $1.5 billion in sequestration cutbacks due to be imposed in January along with other potential funding cuts, and "it's a very scary time for hospitals," Gens notes.

A provision of the Affordable Care Act of 2012, the Hospital Readmission Reduction Program was designed to force hospitals to change the way they treat elderly patients by keeping them out of the hospital and in their own homes. To realize that goal, Medicare imposed penalties that increase annually from from less than 1 percent in fiscal 2012 to a top rate of 3 percent by 2014, based on a hospital's total Medicare payments

"In the long run, it will reduce per patient cost because if a patient isn't going back into the hospital to have the same treatment done, we're not going to be paying for those same treatments twice," Ray Hurd, regional administrator of the Centers for Medicare and Medicaid Services, said of the penalties.

It's not that Medicare is against readmissions, Hurd said. Patients who need hospital care will still be able to get it. The policy only aims to cut unnecessary readmissions.

With Medicare's penalty program in its early stages, however, it's still too soon to tell whether reducing readmissions will actually result in better patient care, said Katherine Baicker, a professor of Health Economics at Harvard.

"The goal is to reduce patients from coming back to hospitals because it's not good for patients and it's not good for Medicare," said Baicker.

Nationally, one in five Medicare patients are readmitted to hospitals annually at an estimated cost of $17.5 billion. Under its new program, Medicare expects to save about $280 million in the first year alone.

In Massachusetts, of the 61 hospitals that accept Medicare payments, 54, or 88 percent, were penalized during fiscal 2012 under the readmission reduction program. That program targets seniors who are most likely to be re-hospitalized within 30 days for pneumonia, heart failure and heart attacks, the three ailments Washington claims are responsible for 30 percent of all elderly readmissions.

Of those 54 penalized hospitals, 12 received the severest penalties which require them to pay back between 0.90 and 1 percent of all Medicare funds received during fiscal 2012. Many of those penalties, critics said, were imposed against "safety net hospitals" that treat poor and minority communities and teaching hospitals, where mortality rates are often low.

"We all agree readmissions are an important thing we need to work on, but the concern about the penalty is that it really penalizes hospitals for things that are out of their control," said Karen Joynt, a cardiologist and instructor in health policy at Harvard School of Public Health who has studied readmission rates.

The data, she says, shows outside factors such as access to outpatient care, patients with mental health or substance abuse issues, seniors with chronic health conditions and a transient patient population dramatically affect the number of patients hospitals readmit.

"The penalties are flawed," said Gens, whose organization has been working with Bay State hospitals to reduce readmission rates since 2009. "The time has come for policymakers to realize this (policy) was not a good decision."

A congressional advisory committee concurred.

In June, the Medicare Payment Advisory Committee suggested that Congress change the penalty formula by setting annual target readmission rates and exempt from penalties those hospitals that reach those targets.

Dr. Robert Klugman, chief quality officer for the UMass Memorial Health Care system, the largest health care system in Central and Western Massachusetts, said the real worry, however, is that the pressure put on hospitals will cause some medical facilities to turn away patients that really do need to be readmitted.

"We clearly have to change the trajectory of health care costs," Klugman said. "The problem is when you look at Medicare, they place rules to penalize the bad people but sometimes it hurts the innocent people too."

Whether the penalties are unfair or not, hospitals still find them to be burdensome, taking away money that would generally be used for equipment, programs and treatments that could benefit Medicare patients and others as well.

At Beth Israel Deaconess Medical Center in Boston, Dr. Kenneth Sands, senior vice president of Health Care Quality, said the hospital expects to lose $2 million in Medicare funding in the fiscal year that began Oct. 1, 2012.

"It's a relatively big proportion of our budget," Sands said of the Harvard-affiliated teaching hospital, one of several teaching facilities affected by the Medicare penalties. Because Beth Israel Deaconess operates on "very low margins" of about 2 percent annually, the impact is noticeable, Sands said.

It also means there will be less money for capital outlay, infrastructure improvements and new programs — "all the things that keep us one of the better medical centers nationally," he said, adding that the cutbacks should have no affect on patient care or result in additional patient charges.

Klugman said he, too, worries that the $1.5 million in penalties imposed on the UMass Memorial Health Care system this fiscal year may impact the six hospitals served under the UMass system.

"If we have less income, we can't invest in necessary equipment. We'll be forced to reduce programs and services," Klugmen said.

Toby Edelman, a senior policy attorney for the nonprofit Center for Medical Advocacy in Washington, D.C., says Medicare's mandate may also be too daunting for some hospitals, forcing them to look to alternative measures to meet the government's new standards.

To skirt Medicare's readmission rules, she said, more hospitals may begin classifying returning patients as "outpatients" even though the patients may spend the same amount of time in the hospital and get the same tests, medications and other care given to admitted patients.

The problem with outpatient status, however, is that patients who need additional care outside of a hospital — in a nursing home for example — may end up paying for that care out of their own pocket since Medicare reimburses for outside costs only when admitted patients transition into a nursing home or rehabilitation center setting, Edelman explained. Patients classified as "outpatients" just don't qualify.

Take, for example, the 86-year-old woman who was listed as an outpatient during her hospital stay and ended up with a nursing home bill of more than $17,000. Another family cashed in an elderly relative's life insurance policy to pay for nursing home care after their loved one was hospitalized as an outpatient instead of being listed as admitted.

"It's very frightening," Edelman said. "People assume when they're in a hospital bed they're an admitted patient. (But) a lot of people are listed as observation status for much of their stay."

Yet, hospitals say they are making progress.

At Beth Israel Deaconess and at other medical facilities, new programs are being implemented that help Medicare patients deal with their own health care after they are discharged. By hiring nurses to check on patients, forging partnerships with doctors, nursing homes and other facilities and installing software that can predict which patients will need more help after leaving the hospital, Beth Israel Deaconess has cut readmission rates by between 15 and 20 percent, Sands said.

Helping to fund that program is a $5 million federal grant that will allow the hospital to add seven transition councilors to help patients make the move from hospital to home. The grant will also place four pharmacists in the community and employ nurse practitioners to work with family members and primary care physicians to ensure that post discharge plans are followed.

At UMass Memorial and its sister hospitals, staff members work closely with high-risk patients to ensure that once discharged, they have ample outside resources to help in their recovery.

"We do everything we can to make sure they have a soft landing," Klugman said.

That includes contacting patients within 24-hours after they are discharged to see if they need further assistance from a nurse. The hospital also is implementing software to identify patients who may require frequent hospitalizations. The measures have already helped the hospital system cut readmission rates by about 20 percent. Whether that's enough to reduce next year's Medicare penalty remains to be seen, Klugman said.

Yet, Baicker remains optimistic.

"The hope is that this improves the quality of care," she said.

Now that's something just about everyone — even Medicare — can agree on.

The New England Center for Investigative Reporting, www.necirbu.org, is a nonprofit newsroom based at Boston University. NECIR intern Anais Vaillant contributed to this report.